Church Split Over Pastor, Money Issue

July 07, 1995|By Patricia Callahan, Tribune Staff Writer.

A North Chicago pastor allegedly deposited more than $540,000 into his personal bank account over the past five years, nearly a quarter of which were cash deposits made primarily on the day after church collections, according to court documents filed Thursday in Lake County.

The charges came in a long-standing lawsuit initiated by Rev. L.C. Luther, pastor of First Baptist Church of North Chicago, who sued the church's trustees when they voted to oust him in 1993.

The charges and countercharges have so split the church that the trustees and Luther conduct separate collections on Sunday.

Thursday's allegations came in a 16-page countersuit filed by the trustees' attorney, David Pardys, along with a 16-page report by Michael Koszola, a former fraud investigator for the U.S. Treasury Department whom the trustees hired to probe the church's finances.

According to the countersuit, Luther, pastor of the church since 1968, acted in a "fraudulent, illegal and oppressive" manner and "misappropriated and wasted" church funds.

Although not present in court, Luther vehemently denied the allegations when reached later Thursday. He said he does not handle church finances but that a five-person financial committee handles all the church's financial matters.

"I don't even go in the finance room," he said. "There's been no $500,000 that went through my account."

Luther said he hasn't even collected a paycheck from the church in nearly two years because the church lacked the funds. When the church needed a bus, Luther said, he borrowed $32,000 on his credit card to pay for it, he said.

"I was supposed to get $50 a week in a retirement fund, and I've used all of that money to keep the church doors open," he said. "I've used my life savings to pay for the church."

The court dispute started in 1993 after the church trustees and church members voted to dismiss Luther amid questions of financial impropriety.

"It seemed like money was going everywhere, and he refused to even meet with us to talk about it," said Leon Shamlin Sr., chairman of the board of trustees. "There was no accountability."

After the vote, Luther sued the church and three trustees-Shamlin, James Cooper and Waldean Williams-saying they did not have the right to fire him, according to court records. Judge Peter Trobe ordered the firing postponed until the suit was settled.

The trustees countersued Luther, and a bitter legal battle ensued, deeply dividing the church. Through it all, Luther has remained pastor of the church.

"We're not fighting in the aisles, but the church is split," said Andrew Glover, a deacon who attended Thursday's court hearing. "We take separate funds. We have separate Sunday schools."

After a flurry of motions, objections and court proceedings, Trobe ordered Luther to turn over some of his personal financial information months ago.

The trustees then hired Koszola, an accountant who specializes in fraud issues, to investigate some of the church's and Luther's financial assets and activities.

Koszola compiled those findings in his report filed in court Thursday.

"Monies being collected on behalf of the church are being deposited in accounts solely controlled by Luther and are being deposited in his personal bank account," Koszola's report says. Luther countersigned more than $95,000 worth of checks, which were drawn on church accounts and made payable to cash or himself, the report charges.

Luther also made cash deposits totaling more than $124,000 "usually made on Monday, the day after Sunday collections," the report charges.

"The beneficiaries of the accounts are Luther's relatives and friends and officers in his organization," the report said. The report lists Luther's 17 credit cards and 25 bank and investment accounts in several states.

Church employees are being paid in cash, and the IRS has no record of the church's federal payroll tax returns, the report said. The "financial mismanagement" jeopardizes the church's tax-exempt status, the report charged.

In addition, the report says, Luther reported on tax returns during this time that his gross income did not exceed $27,800.

Two IRS agents were in court Thursday, but declined to say whether they were investigating Luther or the church.

Luther said he had not seen Koszola's report, but said his records will prove his innocence.

He said he may have temporarily deposited money he raised for the New Fellowship Baptist District Association, which he organized and leads, into his personal account. The association is a not-for-profit group.

"If I raise money for the district association, I don't like to keep a lot of cash on hand, so I will run it through my account. And then I will draw it out and pay it back to the district," Luther said.

Some 30 church members attended Thursday's court hearing, and many said they were outraged by Luther's allegedly fat bankroll.

"We're talking about a man of God here," Glover said. "Church members have put our trust in him for 26 years. . . . Many of us put our homes up for collateral to build that church."